Tether Fined $41 Million For Lying About Fiat Currency Backing
An anonymous reader quotes a report from Bloomberg: Tether will pay $41 million to settle allegations it lied in claiming its digital tokens were fully backed by fiat currencies, putting a major compliance headache behind the world's biggest issuer of stablecoins even as regulatory scrutiny intensifies. For years, Tether told customers and the broader cryptocurrency market that it had $1 in reserve to back every token, the Commodity Futures Trading Commission said in a Friday statement. That claim was wildly misleading, according to the agency. For instance, from June to September 2017, there was never more than $61.5 million backing Tether, even as roughly 442 million coins were circulating at one point. "This case highlights the expectation of honesty and transparency in the rapidly growing and developing digital assets marketplace," said acting CFTC Chairman Rostin Behnam. In its enforcement action, the CFTC said Tether failed to disclose that it held unsecured receivables and non-fiat assets as part of its reserves, and falsely told investors it would undergo routine, professional audits to demonstrate that it maintained "100% reserves at all times." In fact, Tether reserves weren't audited, the agency said. Until at least 2018, Tether manually kept tabs on its reserve levels, a process that wasn't updated in real time, the CFTC said. Tether didn't admit or deny the CFTC's allegations. "Tether agreed to resolve this matter in order to move forward and focus on the future," the company said in a statement posted on its website. The CFTC also announced that Bitfinex, a crypto exchange affiliated with Tether, was fined $1.5 million for permitting retail transactions by American residents.
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